The National Association of Pension Funds has attacked the Government's
determination to press ahead with plans to change tax relief on pension
contributions from 2011.

Joanne Segars, NAPF's chief executive, said yesterday that the plans – which involve taxing employer contributions to pensions at 30pc and halving tax relief for higher earners –were "totally at odds with incentives to save".

Government amendments to the Finance Bill this week saw some concessions to these plans – including a proposal to allow those earning more than £150,000 to retain 40pc tax relief on contributions of £30,000 per year for the next two years, rather than the previously suggested £20,000.

However, NAPF said it still had "deep reservations" about the pensions policy as a whole. Ms Segars said: "The proposed tax changes are expected to undermine incentives to save and may persuade key corporate decision-makers to abandon workplace pension provision altogether. In the current economic downturn, saving today to meet tomorrow's needs is more important than ever."

Independent advisers have warned the proposals create uncertainty among savers. Tom McPhail, head of pensions research at Hargreaves Lansdown, said: "This may only affect a small group now, but where will it end? Rules affecting only a small minority always end up creating a complicated playing field for everyone. What we really need is re-simplification of pensions.

"The fundamental principle of pensions is that contributions are exempt from tax, growth is exempt, but the results are taxed. This undermines that principle as well as the message of 'don't spend today, but save for the future'."